Professional Indemnity insurance – coverage against claims of negligence

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Professional Indemnity Insurance

Professional indemnity insurance is also known as professional liability insurance. It is a form of liability insurance and it helps in protecting advice and service providing individuals and companies from circumstances when they have to bear the full cost for defending against a claim of negligence made by a client and also against damages awarded in a civil lawsuit. In some areas for some particular kind of professional practices professional indemnity insurance is required by law. This liability insurance has different names and forms for different professions. For instance with respect to medical professions it is named malpractice insurance. The term error and omissions insurance is usually used by consultants, brokers, etc.

A typical liability insurance policy responds only to bodily injury i.e. property damage, personal or advertising injury claims. This is the primary reason for getting professional indemnity insurance. For instance if a software does not perform properly and as expected then this does not cause any physical, personal or advertising damages but the loss is financial which can be said to occur because of the developer’s inability to correctly interpret the capabilities of the software.

The policy only covers claims which are made during the period of the policy. Claims which are related to incidents which occurred before the coverage of the policy was active will not covered. The coverage does not include criminal prosecution. Only those legal liabilities under civil law which are specifically enumerated in the policy are covered not all.

The cost of the professional indemnity insurance is usually determined by a specific percentage of the company’s total legal budget. The size of this specified percentage depends upon a number of factors such as the type of industry, the likelihood of the company being driven to the court. Professional indemnity insurance usually ranges from 0.5% to 1% of the company’s total legal spend.

One must bear in mind that the cover is provided on the basis of claims made. So if one cancels the policy while closing the business or retiring then one must arrange for run-off covers. So that if any claims are made after closing of the business or your retirement you will still be covered under the policy.

Professional indemnity insurance is a very specialized area of insurance so before getting one of the policies one must take advice from a professional insurance broker who has sufficient experience in this field. If you are directly making a deal with a insurer then you must ensure that the insurer is a member of the Association of British Insurer (ABI). You can check this by logging onto the website of Association of British Insurer. A hurried decision might prove to be wrong in the long run. So before taking the decision you must ensure that the insurer you have chosen is authentic and the claims of coverage are genuine. There are a number of insurers providing professional indemnity insurance. So must gain complete knowledge and get the right advice from people who can be trusted.